How To Protect Your Online Business From Chargebacks

Jul 31, 2017

If your enterprise receives more than a few credit card orders in a day, you’ve probably had one or two unpleasant experiences regarding chargebacks. For those unaware, a chargeback results in a customer reversing a previously completed sale and gets their money back. Introduced as a means to protect buyers from unscrupulous merchants, chargebacks allow customers to reverse any transaction made online, when the goods or services rendered don’t fit the bill.

Unfortunately, however, the ease of initiating chargebacks has led to a new class of malicious shoppers, who use the system heedlessly. Other chargebacks arise from fraudulent activity, where a cardholder files a report of their credit card having been used to purchase an item without their knowledge or approval.

Regardless of the source, all chargebacks can be detrimental to the cash flow of an online business. Below are several ways you can protect your business from chargebacks.

 

  1. Know all possible reasons

Although it’s easy for a customer to initiate a chargeback, it is never without reason. Chargebacks can only be processed if the buyer states one of the following causes to their credit card issuer.

  • Clerical errors – Clerical issues like duplicate billing, incorrect charging or if a promised refund is omitted can motivate a customer to make a chargeback request.
  • Unsatisfactory quality – if a buyer claims that the purchased item arrived later than promised, was defective, or never arrived at all, they can file a quality-related chargeback.
  • Fraud – A cardholder may issue a chargeback request if they suspect identity theft, unauthorized billing, and other illegal activities.

Unsurprisingly, online fraud is the biggest cause of chargebacks. Customers who believe they have been wrongly charged are quick to call their card company and file a chargeback.

 

  1. Keep records

The most practical way to dodge an incoming chargeback is to present concrete proof of the credit card order in question. Without a physical record of the customer authorizing a charge, they can get their money back uncontested, even if they actually approved the purchase.

To ensure you’re always ready for a chargeback dispute, always maintain records of your credit card orders.

 

  1. Work closely with your merchant account provider

Even the most streamlined business practices cannot guarantee 100 percent protection from chargebacks. To be safe, therefore, partner and work closely with a payment processor that is known to offer practical solutions for dealing with chargebacks.

EMB, for example, equips its merchant accounts with a chargeback protection system that delivers an alert immediately a customer files a chargeback, giving you enough time to dispute the charge. A good payment processor will also be ready to answer all the questions you may have regarding chargebacks, and provide advice on proper business policies.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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